Words from Our New President

Words from Our New President

From: Joe

I want to wish my daughter Lara a very happy 16th birthday. She came to us from Russia 14.5 years ago and added a ton of joy to our lives. (Now, for the obvious questions: Yes, I do have two daughters and, yes, they were born exactly 53 weeks apart in the very middle of Russia.)

(a) – I mentioned last Saturday that the prior week had been our best ever. Our number of page views was 10 percent higher than in any previous week of our existence. Well, guess what? This past week our page views were up another 9 percent. At this rate, our goal of 10 million page views in 2009 is going to become a reality. Remember, that is a lot of points being added to your CPA Exam score (for FREE).

It is amazing how many emails we receive that start off "A friend just told me about your wonderful website." Thanks to every one of you folks who tell their friends, relatives, students, and coworkers about www.CPAreviewforFREE.com.


(b) – I had a free moment yesterday so I went to the website of a very well known CPA Review program. Just curious. What did I notice? Well, two things. The site spent an incredible amount of time talking about the ten people who attained the highest scores in the whole world on the CPA Exam in 2008. That is just great FOR THOSE TEN PEOPLE. I am not too sure who else that helps at all. I do not know about you but it would have never occurred to me when I took the CPA Exam to shoot for one of the top ten highest scores in the country. First, I couldn't see me scoring that high; it was not a realistic goal for anyone that I knew. And, second, I couldn't understand why I could ever want to study that hard. I just wanted to pass. I wanted to see a giant headline: "Joe scores exactly 75." (Actually, I did get two 75s and two 81s.)

Second, I looked forever on that website and I could not find how much they were charging. The Loch Ness Monster is not hidden as well as their prices. They have the cost so well hidden that you practically have to write them a check before you can find out the cost. Hmmm. I wonder why they hide the cost so carefully? My guess is that they are afraid you will pass out when you see what they are charging you. I am always concerned when someone wants to sell me something and will not tell me the price.

You know our motto: Try us FIRST before you spend your hard-earned money.

You do not have to follow the herd. Think for yourself. You can do this and we can help. Save your money—in these times, you might need it some day.


(1) – This past Tuesday, Barack Obama was sworn in as president of the United States. I am not going to get into politics but it was hard not to be pleased. He then gave a speech. He had a lot of great things to say but there was one line toward the end that really caught my attention. In fact, I stopped and wrote it down as soon as I heard it.

"There is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task."

I could not agree more. In fact, I have been preaching that attitude since I started working in CPA Review in 1980. Believe it or not, the important part is not passing. The important part is giving our all to a difficult task. It really does make you a better person. And, that is a worthwhile endeavor.

Of course, it is something we applaud when President Obama says it. How good are we at living up to that kind of assertion?

Nothing so satisfying
Giving our all
To a difficult task

Everyone can say it; not everyone can do it. Can you?

It is all about attitude. You are preparing to pass the CPA Exam, WHAT IS YOUR ATTITUDE? Let's make that a question with multiple choice answers. What is your attitude toward the CPA Exam?

A – I am going to hate every minute of this whole process.
B – I would never do this if I did not absolutely have to do it.
C – I will do what it takes but I am going to complain every single day.
D – It's a great challenge; I am looking forward to seeing how far I can push myself.

Well, we all know the "Obama" answer. However, he has managed to push and challenge himself all the way to the White House. We know what he would do. That is not the real question for us here today. The real question is: which one of these answers reflects your feeling? What is your attitude?

Here's maybe a better way to look at this question. If I were to ask your spouse or your best friend to describe how you are approaching the CPA Exam, what would that person say about you? What attitude radiates from you?

What I really want is for your spouse or best friend to say about you: "It is amazing. I never thought it would happen but the challenge is really bringing out the best in (fill in your name). I can just see more interest and energy and enthusiasm. There is more of a purpose in life. I figured this would be one long series of complaints but, actually, there is something here that is bringing out the best."

That is what a real challenge does for you. If you have the right attitude, it can make you a better person.

Go for that passing grade
and
Throw yourself into the challenge.


(2) – As always, please know that you can unsubscribe from these email lessons whenever you wish. Just scroll to the bottom of any lesson and click on the link that you will find there. However, don't get in a rush; we love having you on board.

If someone has forwarded this email to you and you would like to receive these lessons on a regular basis, just go to www.cpareviewforfree.com and register. Be sure that the box about getting additional material is checked. These lessons are the additional material.


(3) I mentioned getting emails from our "customers." Here is a wonderfully nice note that I received recently from KT. Notes like this really do pay for the website.

"I have found your website very helpful. This past year, I bought a CD review course through our firm at a discounted rate. I took the audit section in October, but did not pass. Shortly after, I received an email from a CPA about your website. I like the format of your website and the emails with practice questions sent each week or so. I really appreciated your message in your December email about the television and wasting time. My television will be off for more study time, for sure. I wish I had learned of your website before spending any money on study material, but your website will give me even more practice. Thanks so much for the free help. You are truly a caring individual and teacher. You actually like helping people to succeed. Thanks for sharing."

And, here is another email, this one from NM:

"I thank you for the wonderful support you and your team are extending to the CPA students through your free website. I have extensively used your website and I have cleared all my subjects within 6 weeks. It feels great because I had devoted 4 full months to the course and I cleared it in the first shot. And I owe a great part of my success to you."


(4) – I was talking with my intermediate accounting students last week about the importance of building a strong foundation of knowledge. It is hard to answer any questions if you don't have a solid core of understanding.

I introduced them to my concept of "3 second questions." These are questions that are so basic that if you get them, you should be able to count to three and then immediately answer the question. I suggested that they start making a list of all the 3 second questions. It helps them decide what is important and what they should know.

Three second questions are not a bad concept for CPA Exam Review also. As you go through a topic, write down everything you should be able to answer off the top of your head. Believe it or not, there is a fairly finite list of things you should know in three seconds. If you can just answer all of the three second questions, you are very close to passing the CPA Exam.

Let me give you an example (or the start of an example). Assume that you are going to take Regulation and you are currently studying individual income taxes. You are going through our questions and answers and writing down what you should know.

What are some of the three second questions that you should expect to be able to answer off the top of your head? As you study, you should ask the question, count to three, and give the answer.

Well, here is the start of such a list. I will not try to list everything but you can get the idea.

--Name three types of income that are taxable.
--Name three types of income that are nontaxable.
--How do taxpayers qualify to file a joint return and what are the advantages?
--How do taxpayers qualify as head of household and what are the advantages?
--How do taxpayers qualify as qualifying widow or widow (surviving spouse) and what are the advantages?
--In general, what are the five rules for qualifying as a dependent on a taxpayer's tax return?
--When does the amount of money that a person make not impact the decision as to whether they are a dependent on another person's tax return?
--When are dividends nontaxable?
--When is interest received from a US Series EE bond nontaxable?
--When is a scholarship taxable?
--What are examples of passive activities?
--When you have passive activity gains and losses, what is the tax effect?
--When is a prize taxable?
--How are gambling gains and losses taxed?
--An employer pays for life insurance on an employee. When is that benefit taxable to the employee?
--What is the statute of limitation in connection with the filing of an individual tax return? When does it go up to six years?
--What is a capital asset?
--What is meant by short-term versus long-term in connection with the sale of capital assets?
--What are the tax rules if you sell your house at a gain?
--What are the tax rules if you receive a gift and later sell it?

I assume you get my point. You can have a great little study guide by just listing out 3 second questions. There is nothing here on this list that you could not learn in a short period of time to get you ready for the CPA Exam.

Better still, by working our questions at www.CPAreviewforFREE.com, you can find the answers to all of these three second questions and many more.


(5) – Time for a little practice. Here are some brand new questions that we will be loading up on the CPA Review for FREE website next week. You can get a head start on these.


Regulation

Silas Wykowski receives 20 shares of stock from a friend as a gift. These shares had originally cost the friend $400 but were only worth $300 when the conveyance to Silas was made. The stock was held for some time and then sold for $280. What is the income tax effect recognized by SilasWykowski?

A - $300 gain at the time of gift and a $20 loss when sold.
B – No gain or loss at the time of gift and a $120 loss when sold.
C – No gain or loss at the time of gift and a $20 loss when sold.
D - $400 gain at the time of gift and a $120 loss when sold.

Answer is C

There is no income tax effect when a gift is made. A gift tax might have to be paid if the amount is large but this is a small gift. If the value then goes down, the owner can recognize a loss when sold. That loss is the difference in what was received and the lower of the tax basis to the previous owner (usually original cost) and the fair value at the date of the gift. Here, that fair value when conveyed ($300) is less. So, the tax loss is this $300 less the $280 sales price or $20.


Financial Accounting & Reporting

On December 31, Year One, United Open Housing, a nongovernmental not-for-profit organization, received a promise of a monetary gift of $10,000 to be received in five years. The gift is unconditional in that the charity does not have to do anything to qualify. However, the donor has specified that the gift cannot be utilized until received (for example, the promise cannot be sold for cash). There are no restrictions on the use of this money. The charity is confident that it will collect all $10,000. What is the initial recording by United Open Housing?

A – No recording is made.
B – A receivable of $10,000 is recorded along with an increase of that amount in unrestricted net assets.
C – A receivable of $10,000 is recorded along with an increase of that amount in temporarily restricted net assets.
D – A receivable for the present value of $10,000 is recorded along with an increase of that amount in temporarily restricted net assets.

Answer is D

Because the money is not expected to be collected within the next year, it must be recorded at its present value. The money cannot be used until received and, therefore, serves to increase the temporarily restricted net assets of the organization.


Auditing and Attestation

The Ligano Corporation is being sued for $3 million by the Stoneco Company. Abner and Doubleday are the independent auditors of Ligano and they are currently assessing the reporting of this litigation. Which of the following is the most likely test that they will carry out?

A – Discuss the case with Ligano's attorney and review the attorney's files to date.
B – Evaluate the procedures used by Ligano to assess the likelihood and amount of any potential loss from the suit.
C – Discuss the case with Stoneco's attorney with the understanding that all information is confidential and possibly biased.
D – Discuss the case with court officials who have jurisdiction over the proceedings.

Answer is B

Financial statements are produced by the management of the reporting company. Normally, the auditor begins by coming to an understanding of how client figures and disclosures were derived. For litigation, the auditor then sends a list of the claims and the likelihood and amount of loss as determined by the client to the company's outside attorney. This person is then asked to contact the auditor to indicate whether there is any disagreement with these assessments.


BEC

What is a call option?

A – The obligation to sell a security at a specified price in the future.
B – The right to purchase a security at a specified price for a defined period of time.
C – The right to sell a security if a specified event occurs.
D – The obligation to provide specified information to holders of a security if certain events take place.

Answer is B

A call option gives the holder the right to purchase a security at a specified price for a certain period of time (often three months or less). For example, if the price of company X stock is $30, an investor might buy a call option that would allow the purchase of company X stock for $32 per share over the next 3 months. If the price goes to $40 per share, the investor has made a large profit from a small investment.


To all of our friends around the world, HAVE A GREAT DAY!!!

Work hard and add some points to your CPA Exam score.

Have the right attitude. Enjoy the challenge that you are facing.

Joe Hoyle
Co-Founder
CPA Review for FREE